U.S. Tariffs on Indian Textiles

Context:

The U.S. government under President Donald Trump imposed 50% tariffs on Indian imports, severely impacting India’s textile export hubs, especially Tiruppur and Karur in Tamil Nadu, leading to production cuts, stockpiling, and wage uncertainties.

Background of the Issue

Scale of Exports: India exports $11 billion worth of textiles and apparel to the U.S. annually, with Tamil Nadu contributing nearly $4 billion.
Concentration Risk: Districts like Tiruppur, Karur, and Coimbatore are heavily dependent on U.S. buyers such as Walmart, Costco, Target, and GAP.
Tariff Shock: The tariff escalation from 25% to 50% in September 2025 has halted shipments, created stockpiles, and disrupted payments.

Impact on Industry and Workers

Exporters’ Challenges
- Orders held back; ?65 crore worth of stockpiles at single firms.
- Factories forced to close; 2 of 5 units shut down at RRK Cottons.
- Profit margins eroded (average 5–10%), buyers seeking heavy discounts.
MSME Supply Chain
- Thousands of MSMEs in yarn, dyeing, embroidery, printing, packing face reduced workload.
- Embroidery units alone contribute ?1,000 crore annually, now at 50% capacity.
Labour and Wages
- 2–4 lakh workers (direct and indirect) employed in Tiruppur’s ecosystem face job insecurity.
- Wages, overtime, and bonuses reduced; absenteeism has dropped as workers fear job losses.

Responses and Way Forward

Immediate Relief Needs
- Relief package to compensate at least 25% of tariff losses.
- Moratorium on loans and revival of Focus Market Scheme for exporters.
- Enhanced duty drawback rates to restore competitiveness.
Long-Term Strategy
- Market Diversification: Expand exports to EU, Africa, Middle East, and Latin America.
- FTA Leverage: India–EU Free Trade Agreement and Indo-Pacific trade pacts are critical.
- Value-Addition and Innovation: Shift towards technical textiles, smart fabrics, and e-commerce channels.
- Global Partnerships: Explore joint ventures in Africa or Sri Lanka for final processing to bypass tariffs.